THE NEXT ECONOMY: COVER STORY

The Rise of the Consumerate

Social media and high technology are subverting the economy’s traditional, top-down hierarchies. As consumers gain leverage, corporations are learning to obey.

By Jeff Howe

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The face of consumers: Molly Katchpole used social media
to fight two megacorporations—and prevailed.(AP Photo/Cliff Owen)

Molly Katchpole, a freckled, chipper, 23-year-old post-grad, doesn’t look like a rebel at the barricades. Yet twice last fall, she led consumer revolts—against Bank of America, then Verizon—and both times, she prevailed. Katchpole became the emblem of angry consumers who have seized on the reach of social media to take on the giants of the business world. The insurrections heightened the sense that the spread of high technology is shifting power from institutions to individuals. What used to be a one-way conversation—from corporations to consumers, from rulers to the ruled—is becoming a dialogue.

Katchpole’s success in talking back landed her a dream job. A progressive nonprofit advocacy group in Washington called Rebuild the Dream hired her to help run its campaigns to make student loans more affordable and reduce the principal for underwater mortgages. Those are just the sort of hot-button issues that tech-savvy, petition-happy young Americans might be expected to support.

Wishful thinking. Although Katchpole’s petition to persuade Bank of America to revoke a monthly $5 fee on its debit-card accounts drew some 300,000 signatures last October, her recent blog post blasting Sallie Mae, the huge student lender, attracted only four comments. So far, at least, Katchpole has been unable to recapture the wellspring of wrath that empowered her to bring two megacorporations to their knees.

What went awry on the way to the revolution? “I don’t know, ... ” she began, then trailed off. But in a way, she does know: “The $5 fee was this simple thing that pissed people off. Student loans”—Katchpole paused—“are complicated.”

“People are pissed because they feel no one’s listening to them. And often, no one is listening to them.”

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Indeed. So are many other substantive issues: the federal debt, Wall Street regulation, climate change, the rising cost of health care. A petty, insulting bank fee is easier for a peripatetic public to comprehend. “We’re definitely in the shiny-bauble stage of the consumer backlash,” said one consumer advocate who asked to go unnamed for fear of alienating his group’s members. “Most of these backlashes are in response to easily understood changes to services millions of people use.” It’s no accident that this spate of consumer revolts has relied on social media, which prize the pithy—140-character tweets, for instance—at the expense of complexity.

But this is only one aspect of a swiftly evolving relationship between corporations and consumers, driven by the technological possibilities—and temptations—of e-capitalism. The Molly Katchpoles of the world may be the least of the Fortune 500’s worries. Far more threatening are the apps and smartphones that are injecting transparency into pricing practices. If would-be purchasers can first visit Best Buy and then unleash their smartphones to find the best Internet deal, they serve as an invisible hand in the marketplace—the likes of which Adam Smith, the first philosopher of capitalism, never imagined.

And the market is responding. Quicker-witted businesses are learning how to harness technology and social media for their own ends. Groupon reinvented the coupon for the digital age; Procter & Gamble teamed up with NBC to create its own content on sites such as Petside.com and DinnerTool.com; Ford has turned its blog into a forum for car enthusiasts.

The common thread is that smart companies have learned to take the initiative, to reach out and befriend consumers before they, too, become the target of an insurrection. The wired public, in a sense, has become an interest group of its own, able to punch well above the weight of an AFL-CIO or a National Rifle Association. Just look at what happened to the Susan G. Komen Foundation when it triggered its own social-media squall: Within days, an upsurge from abortion-rights supporters forced the breast-cancer charity to abandon its plan to pull funding from Planned Parenthood. Millions of people can gather around a single Facebook page or Twitter hashtag and draw the attention of the global media. For a day, or maybe a week, they become a force more powerful than any single political action committee or watchdog group or national newspaper.

The influential economics blogger Umair Haque calls these temporary agglomerations “proto-institutions.” He draws a connection between the protesters in the #BofA revolt and those of the Arab Spring—“they emerge, pop off,” then blend back into the general population. With tweets and e-petitions and YouTube videos, consumers are fast becoming to the economy what the electorate is to the body politic—an often disorganized, occasionally passionate force that, once riled, few institutions can withstand. Call them the “consumerate.” They’ve got a powerful weapon in their hands. It’s cocked, and it’s loaded. So far, it’s been aimed at minor targets. But for how long?

THE POWER OF HASHTAGS

Revolutions don’t proceed by great leaps only. It’s the tweaks, the incremental advances, that can make the difference. Gutenberg’s printing press in 1440 didn’t immediately cause the flowering of learning and literacy we call the Renaissance. It took the cheap and portable octavo edition, invented some 60 years later, to put knowledge within reach of Everyman. As Clay Shirky, a noted new-media scholar, has written, “What seemed like a minor change—take a book and shrink it—was in retrospect a key innovation in the democratization of the printed word.”